Professor Joel Fox on Business Groups Split on Gas Tax Hike | The Orange County Register

April 6, 2017  | 3 min read

Business groups are split on hiking gas tax

April 6, 2017 | By Joel Fox | The Orange County Register

As the governor and legislative leaders work swiftly to pass their gas tax and vehicle fee increase proposal, the business community as a whole is displaying a split personality on the issue. After years of begging for action on the roads as the state’s infrastructure continued to deteriorate, big business generally can be found in favor of the tax proposal. Small business, generally, is concerned with the extra burden a 43 percent gas tax increase will mean to their operations, their workers and their customers.

All sides believe something must be done to improve the transportation system, which, in turn, will enhance economic growth, business leaders believe. On the other hand, tax increases can weigh down the economy, cutting into family and business budgets.

That’s why you’ll see conflicting praise and condemnation of the tax plan from leaders of the business community.

Allan Zaremberg, president of the California Chamber of Commerce, jumped aboard the tax proposal bandwagon. “Our transportation infrastructure is critical to California’s economy. The California Chamber of Commerce supports new revenue to repair and maintain our roads and bridges and to reduce traffic congestion.”

Meanwhile, Tom Scott, head of the small business National Federation of Independent Business/California, complained, “Californians already pay billions in taxes every year to fund these repairs. Sacramento already has the money to fix our roads.”

The governor’s plan calls for a 12-cents-per-gallon gas tax increase and a 20-cent increase for diesel fuel. Additional vehicle registration fees would run from $25 for vehicles worth $5,000 or less up to $175 for vehicles worth $60,000 or more. In addition, a new $100-a-year fee will be levied on zero-emission vehicles, under the theory that they don’t use as much or any gasoline but still contribute to deterioration of the roads.

The greatest portion of the $52 billion to be collected over the next decade — $30 billion — would be dedicated to state and local “fix-it-first” pothole and road repairs. There is money set aside to improve local public transportation ($7.5 billion) and a smaller amount dealing with congestion on major commute corridors ($2.5 billion), and even $1 billion to improve infrastructure that promotes walking and bicycling.

The argument against the tax increase is that there is plenty of money Californians already pay for road fixes — if that revenue were spent properly. Transportation dollars have been funneled to budget purposes other than infrastructure needs. Pull that money back, make a few more changes, like spending auto insurance tax revenue on the roads, and you would have more than the governor’s tax and fee increase of $5.2 billion to spend on the roads annually. That is the Republicans’ view.

The governor and legislative leaders have recognized the problem of past misuse of transportation dollars, so their plan proposes to pass a constitutional amendment to assure that new revenue collected under the tax plan will only be used for transportation.

Business groups that support the tax increase accept what they see is a political reality — moving money from other programs to transportation puts holes in other areas of the budget that the majority Democrats want to fund. Business leaders don’t think the Democrats will make the choice to reduce major funding from other budget areas. Fighting for a major shift in revenue probably means more delays in fixing the roads, so those business leaders and associations have chosen to support the tax.

Passing the tax is no sure thing, though. A two-thirds vote is necessary. While no Republican has agreed to support the tax increase as of yet, the Democrats do own a two-thirds supermajority in both houses of the Legislature. However, a number of Democratic lawmakers are cautious about supporting a tax increase that would adversely affect many constituents, especially low-income individuals and workers who have to commute a long way to their jobs.

Are enough voters in this heavily Democratic state willing to both oppose the gas tax increases while seeing funding cuts from other programs, as money is shuffled to road repair?

Many business leaders are frustrated with the choices facing them. They have long argued that road fixes should be priority one for the state. They believe that improving infrastructure is a key to a healthy economy. With better transportation comes more jobs. Californians have long named jobs and the economy as the No. 1 issue in statewide polls. Yet, there is no indication that the voters will demand that roads are funded above all other priorities.

Some business leaders, assessing the political landscape and the size of the infrastructure improvement needs, reached the decision to support the tax package released by the governor and Democratic legislative leaders. Other business leaders continue to resist.

Joel Fox heads the Small Business Action Committee, co-publishes the website FoxandHoundsDaily.com and teaches at Pepperdine University’s School of Public Policy.

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